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On Tuesday, Motilal Oswal Securities initiated coverage on Radico Khaitan (NSE:RADC) Ltd (RDCK:IN) with a Buy rating and set a price target of INR3,000.00. The firm’s analyst highlighted Radico’s impressive performance in the consumer sector, noting a 25-fold return over the past decade and an 8-fold return in the past five years. The valuation multiple of Radico has also experienced significant re-rating during this period, attributed to the consistent outperformance of its Prestige & Above (P&A) portfolio.
The analyst from Motilal Oswal Securities expressed confidence in Radico’s potential for strong earnings growth in the next three to five years. This optimism is based on the company’s opportunity to scale up its P&A portfolio within the industry. Radico’s P&A portfolio currently accounts for approximately 15 million cases, in contrast to the P&A industry’s 200 million cases and the total Indian Made Foreign Liquor (IMFL) industry’s 400 million cases.
Radico Khaitan is preparing to expand its product offerings by launching new items in the premium and luxury range, sectors where the number of industry cases is high. The expansion is expected to broaden Radico’s target consumer base and bolster trade confidence in the company’s execution capabilities, leading to a higher acceptance level for its new products.
The securities firm projects a 16% revenue compound annual growth rate (CAGR) for Radico from the fiscal year 2025 to 2028 and anticipates an EBITDA margin of 16.2% by fiscal year 2028, which is comparable to the margin in fiscal year 2019. The analyst foresees a roughly 30% earnings per share (EPS) CAGR for Radico, supporting the continuation of its rich valuations.
To determine the price target of INR3,000, Motilal Oswal Securities applied a 60 times price-to-earnings (P/E) ratio to Radico’s estimated earnings per share for June 2027. This valuation reflects the firm’s positive outlook on Radico Khaitan’s future financial performance and market position.
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